The Default Notice as Required by the National Credit Act 34 of 2005

• Jurisdiction: South Africa
• Author: Michelle Kelly-Louw
• Published date: 16 August 2019
• Pages: 568-594
• Date: 16 August 2019

The Default Notice as Required by the National

Credit Act 34 of 2005

MICHELLE KELLY-LOUW*

University of South Africa

1 Introduction

The National Credit Act

1

has signif‌icantly limited a credit provider’s right

to enforce the credit agreement where a consumer (ie, a debtor) defaults under

his agreement or where the credit provider wishes to cancel the agreement and

claim for the repossession of goods. The Act has drastically changed the

customary legal debt-collection procedures.

2

There is now a new prescribed

procedure set out in Part C of Chapter 6 of the Act that a credit provider has to

follow when he wishes to collect a debt from a defaulting consumer, and

before he may institute legal action in a court of law.

Of particular importance, in this article, is s 129(1)(a) of the Act providing

that a default notice (ie, basically a letter of demand) sent to a defaulting

consumer must draw the latter’s attention to the fact that he has a right to

make use of various alternative dispute-resolution mechanisms

3

before the

credit provider may institute legal court proceedings. Unfortunately, the Act

does not prescribe how this notice should be delivered to the consumer. Until

recently, case law was divided on whether this notice actually had to be

received by the consumer before it would constitute a valid notice that would

entitle the credit provider to approach the court for an order enforcing the

credit agreement.

4

Some courts expressed the view that actual knowledge of

the default notice on the part of the consumer is essential,

5

while others said

that this view sets an unrealistically high requirement and that actual

notif‌ication of the consumer is not a requirement as long as the credit provider

has sent the notice to the correct address provided by the consumer in the

* BIuris LLB LLM LLD (Unisa) Dip Insolvency Law and Practice (UJ). Professor in the Department

of Mercantile Law, School of Law,University of South Africa.

1

Act 34 of 2005 (‘the National Credit Act’ or simply ‘theAct’). In this article the singular includes

the plural and vice versa, and the masculine includes the feminine and neuter.

2

See ss 127-33.

3

See ss 134 and 135.

4

See also M Kelly-Louw ‘Credit Law’ 2010 (1) Juta’s Quarterly Review of South African Law in par

2.3.1 and M Kelly-Louw ‘Credit Law’ 2010 (2) Juta’s Quarterly Review of South African Law in

par 2.2.1.

5

See, eg, Firstrand Bank Limited v Ngcobo & Another (24661/09) [2009] ZAGPPHC 112 (11

September 2009), available at http://www.saflii.org/za/cases/ZAGPPHC/2009/112.html (for a discussion

see M Kelly-Louw ‘Credit Law’ 2010 (1) Juta’s Quarterly Review of South African Law in par 2.3.1);

Absa Bank Ltd v Prochaska t/a Bianca Cara Interiors 2009 (2) SA 512 (D) (for a discussion see

M Kelly-Louw ‘Credit Law’ 2010 (1) Juta’s Quarterly Review of South African Law in par 2.3.1, but for

a more comprehensive discussion see JM Otto ‘Kennisgewings Kragtens National Credit Act: Moet die

Verbruiker Dit Ontvang? – Absa Bank Ltd v Prochaskat/a Bianca Cara Interiors 2009 2 SA 512 (D)’

(2010) 73 Tydskrif vir Hedendaagse Romeins-Hollandse Reg 136; and FirstRand Bank Ltd v Dhlamini

2010 (4) SA 531 (GNP).

568

(2010) 22 SA Merc LJ 568

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agreement.

6

The Supreme Court of Appeal

7

has now ended this conf‌lict by

f‌inding that the actual receipt of the default notice by the consumer is not a

requirement, just as long as the notice was sent to the chosen address set out

in the credit agreement using the delivery method (for example, by registered

mail) also selected in the agreement by the consumer.

In this article, special attention will be given to these different views

expressed by the High Courts and the recent decision by the Supreme Court of

Appeal. The article will also entail a general discussion of the s 129(1)(a)

notice, the information that a credit provider needs to include in this notice,

and how this notice should be delivered to a consumer.

2 The Notice and the General Procedures Before Legal Court

Action May Be Instituted

Section 129(1)(a) of the National Credit Act provides that if the consumer

is in default under a credit agreement, the credit provider may draw the

default to the notice of the consumer in writing and propose that the consumer

refer the credit agreement to a debt counsellor, alternative dispute resolution

agent, consumer court or ombud with jurisdiction, with the objective that the

parties resolve any dispute under the agreement or develop and agree on a

plan to bring the payments under the agreement up to date.

8

However,

although s 129(1)(a) provides that the credit provider may send a consumer

this default notice, it would seem from other sections, such as ss 129(1)(b)

and 130(3)(a), that this notice must be sent before a court can be approached

6

See, eg, Firstrand Bank Ltd v Bernardo & Another (608/09) [2009] ZAECPEHC 19 (28 April

2009), available at http://www.saflii.org/za/cases/ZAECPEHC/2009/19.html;Munien v BMW Financial

Services (SA) (Pty) Ltd & Another 2010 (1) SA 549 (KZD) (for a discussion, see M Kelly-Louw ‘Credit

Law’ 2010 (1) Juta’s Quarterly Review of South African Law in par 2.3.1); First National Bank Ltd v

Rossouw & Another (30624/09) [2009] ZAGPPHC 165 (6 August 2009), available at http://

www.saflii.org/za/cases/ZAGPPHC/2009/165.html;Standard Bank of South Africa Ltd v Mellet &

Another (3846/09) [2009] ZAFSHC 110 (30 October 2009), available at http://www.saflii.org/za/cases/

ZAFSHC/2009/110.html;Starita v Absa Bank Ltd & Another 2010 (3) SA443 (GSJ) (for a discussion

see M Kelly-Louw ‘Credit Law’ 2010 (2) Juta’s Quarterly Review of South African Law in par 2.2.1);

Standard Bank of South Africa Ltd v Rockhill & Another 2010 (5) SA 252 (GSJ); Standard Bank of

South Africa Ltd v Maharaj t/a Sanrow Transport 2010 (5) SA 518 (KZP); and Nedbank Limited v

Mokhonoana 2010 (5) SA 551 (GNP).

7

See Rossouw & Another v FirstRand Bank Ltd 2010 (6) SA 439 (SCA).

8

Section 129(1) does not apply to a credit agreement if that agreement is subject to a debt

restructuring order, or to proceedings in a court that could result in such an order (see s 129(2); Standard

Bank of South Africa Ltd v Kruger; Standard Bank of South Africa Ltd v Pretorius 2010 (4) SA 635

(GSJ); First Rand Bank Ltd v Evans (1693/10) [2010] ZAECPEHC 55 (31 August 2010), available at

http://www.saflii.org/za/cases/ZAECPEHC/2010/55.html;FirstrandBank Ltd v Collett 2010 (6) SA 351

(ECG); and SA Taxi Securitisation (Pty) Ltd v Nako & Others (19/2010, 21/2010, 22/2010, 77/2010,

89/2010, 104/2010, 842/2010) [2010] ZAECBHC 4 (8 June 2010), available at http://www.saflii.org/za/

cases/ZAECBHC/2010/4.html.

DEFAULT NOTICE UNDER THE NATIONAL CREDIT ACT 569

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